The Buyer's Agent Bonus: Thanks, But No Thanks.

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The Buyer's Agent Bonus: Thanks, But No Thanks.

Thanks, but no thanks. Therein lie my in-depth sentiments regarding buyer agent bonus compensation.

It’s a tricky business, this whole trust-building endeavor. From the initial consultation with a prospective client, to the signing of the closing documents and all stops in between, a certain rapport and mutual belief in the positive intentions of each party must be developed to produce the desired outcome: namely, the purchase of the most appropriate property at the most advantageous terms. With ample opportunity for an agent to unintentionally spit the bit along the way, warding off the encroachment of countless variables that would undermine the health of the relationship is an undisclosed facet of the job. And what, pray tell, is the swiftest and surest endangerment of one’s relationship with the client? Money. More specifically, the belief, whether founded or not, that the agent is twisting his fiduciary obligation by putting his financial interests before those of the client. That’s a relationship killer. Once any doubt creeps into the mind of the client as to the motivation of his representative, you might as well go ahead and split the sheets.

I don’t want a bonus to sell your listing.

If your listing fits my client’s criteria, and you are offering me fair compensation for services rendered, I will show the property. If you are offering compensation that does not meet my minimum standards, I will show the property if my client agrees to make me whole. Mind you, that’s a terrible disincentive to buyers and buyer’s agents alike, but run your business however you see fit. What I do not require is any kind of additional spiff over and above suitable compensation. An extra percent if the transaction closes in the next 30 days, a co-broke that is double the normal range of compensation, a week aboard the listing agent’s yacht after the close of escrow … all such supposed motivators are liable to call my judgment into question.

Am I really pushing property “x” because it represents that best value proposition for the client, or am I mentally slathering SPF 15 over my epidermis in preparation of the promised week in the Bahamas?

I’m not real keen on trying to explain to my client why I am grossing 20k on a $200,000 transaction while we are sitting around the closing table.

So while I appreciate the extra incentive a listing agent and/or seller may try to stoke via a buyer’s agent bonus, it calls my credibility into question. Matter of fact, I will typically apply any such bonus (if monetary value can be readily affixed) to my client’s closing costs. I maintain my reputation and my client gets an unexpected perk. In fact, I would be in breach of my personal ethics, if not my fiduciary obligation, if I didn’t carve out such extraneous allotments for my client’s benefit. If I am being compensated fairly for my role in the transaction, it is my duty to corral any additional nickels that fall out of the seller’s pockets for the buyer.

Want to expedite your home sale? Put the agent bonus back in your shorts. Repackage the offering as a reduced price or concession towards the buyer’s closing costs. Make the terms more appealing to my client and you will produce the desired result. The seller gets his fast sale, the buyer gets more attractive terms and both agents get happy, referral-prone clients. Everybody wins.

If I want to go play Dread Pirate Roberts in the Caymans, I’ll do it on my own dime.

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Posted by Paul Slaybaugh, Scottsdale AZ Real Estate on 08/07/2010 01:25 PM

Comments (141)

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Originally posted at: The Scottsdale Real Estate Files: The Buyer's Agent Bonus: Thanks, But No Thanks.

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141 Comments on The Buyer's Agent Bonus: Thanks, But No Thanks.

AUG

2010

BRAVO! Paul: Boy did you hit a nerve. I really believe that the "bonus" offered to any agent for doing what they should be doing anyay is "graft" and as such it is a bribe or an underhanded way of trying to sway an agent to "do something they might not otherwise do"...what a sham and an insult to everyone of us in this business! Thanks for putting it out there for us all to read. I can't wait to see the responses!

Paul - we are on the same page here. It all comes out on the HUD and any bonus would certainly make my clients wonder. If there is a bonus and I can't get the price dropped, I will pass the bonus to my client(s). And if I can get the price dropped, I will still pass the bonus to my clients. Rebates are allowed here in Georgia.

Paul,

I think you will be seeing a lot of positive feedback on this well thought out and articulate post.

Do we really need to be bribed to do our jobs?

Well, I imagine some folks do. Guess, I'm still content to make a fair split and have happy clients at the end of the transaction who give me a referral worth far more that the seller's bonus.

Thanks for your input, gang. I'll be interested to see if there are any counterpoint arguments with a perspective I have yet to consider, but it would be a pretty tough position to defend on face value. Of course, the flip side of the coin is the knucklehead offering of a substandard co-broke with a "bonus" that brings total compensation to a livable wage. Some bank on the fact that the agent who just fell off the turnip truck will be all fired up about the "extra" incentive.

This is timely and I too will be curious to see if there are any counter-point comments. In my area we are FINALLY seeing these bonuses dwindle and fade away. They do nothing but undermine our clients trust of us as professionals. They have also been, and may continue to be, scrutinized by real estate commissions since they can really smell like a bribe. It is a stretch to try to make them sound as if they are in either a buyer's or seller's best interest.

Drop the price and be done with it.

Paul: Very well said. This is one of my pet peeves and I too have given any bonuses back to the buyers. It is a bit insulting to think that we would push one property over another just because it benefits us financially. I thought we were supposed to be fiduciaries? That means putting our client's needs in front of our own. Love this!

"I mentally slathering SPF 15 over my epidermis in preparation of the promised week in the Bahamas?"

Slaybaugh - Reading you can do one's visual cortex some good. While I never worked that end of the transaction, I would find it rather difficult to color oneself the contrarian to your point of view on this matter.

Keep the Spiff on the Lime Green Pinto at the car dealership down the road and price the house right and throw the Spiff towards my buyers closing costs.

If it fits my clients needs with a fair price and good terms I will definitely show it to them.

Paul, Right on the money. It's our mindset also, anything "extra" goes to the buyers. We will not risk our reputation for a few extra dinero!

Paul - And I thought it was just me that though this too..... I never took the "kickback" on the home warranty plans either, I would deduct that from the buyer or seller charge. A buyer agent "BONUS" is not going to make me "show" the house to my clients. My job is to do everything to "benefit my client".

Paul - Why not take in all the incentives you can get - you deserve it, you made the transaction work and who knows when you will get the next commission check, corporate world receive big bonuses and don't think twice about it. Don't you have to save for rainy days...right?

So, you thought, finally somebody countering my post :)

I don't think you will find a counter comment, me included - what is here to counter on. I still sleep well at night, I love when I have a client that I can give back something being offered through an incentive. I totally agree that bonuses or other incentives should benefit the buyer only.

I second that! A buyer's agent bonus that's blatantly pormoted in the remarks of a listing sometimes keeps me from showing it for the very reason you mentioned. Trust. How can a prospective buyer possibly believe that I selected the listing for its own merit.

Excellent point! To me, the bonus seems underhanded as well. I can't imagine how the client would feel. Glad to see so many agree on this one.

Ah, when my sellers bring up "agent" bonus, I tell them no, lets offer to pay buyers closing costs instead. Why, because I work with both buyers and sellers.

Have I ever accepted a buyer bonus? Yes, but it was an REO and my buyer still got an excellend price and was aware as soon as I was their was a bonus. I offered it to him and he refused. I worked really hard to get it closed. In fact that buyer also gave me a gift certificate about a week after closing. Mind you the bonus WOULD NOT have paid for a vacation...

There is an agent in these "parts" who offers (or used to offer) a free cruise to the selling agent for his listings. The catch was his wife is a travel agent, you had to go with him and his wife and you traveled on THEIR schedule. He's about 85 years old. Sounds like a blast. That was his incentive for any property he listed over $500K.

I don't take "incentives". But it is interesting to see what they might be. Great post.

Paul,

I've given the buyers agent bonus to my buyer clients more than once. I just write into the contract that the bonus of xxxx goes to the buyer as a credit.

Rich

Paul -

I like to think that I get a bonus with every transaction - a satisfied customer and a long term agent/client relationship. No one needs to pay me for that kind of satisfaction.

I never will take any kind of bonus and I think it is not in the best interest of the seller. The incentive should go to the buyer.. If the co-broke fee is not competitive, but there is a bonus to the buyer's agent, it is even worse, in my opinion.

Bonus commissions have never worked in our market. So you do not see them. I guess that supports your point.

If there is a bonus and my client wants to make an offer, I disclose it and make sure they know that it will go to them should the deal close.

Paul, I too refuse the good old "agent bonus". I tell my sellers to take it off the darned price...It still irritates me when I hear agents that are showing homes just because of the bonus.

I never show a home due to a bonus being offered nor do I not show a home because no bonus is offered. I have never had one offered by a private individual, but have from developers. Sometimes one model has a bonus and another has none. Sometimes the buyers pick one, some times the other. I do not influence them one way or the other. If they decide to go with a resale, that too is fine. But I guess many of you must be really raking it in to be able to turn down a developer's bonus if the buyer (with NO pressure from me at all) happens to chose a home that does have a bonus attached to it. Kudos to you, truly. But it is completely legal and here we sell many a mobile home for $40K and under. You figure out the profit on those.

Resale bonuses are almost never seen here. Just those from developer programs. And normally, I do not even know that a bonus is offered until the buyers have seen the model homes.

So if a developer selling a home of 150K offers couple $K of bonus, I will not reject it. Those are funds I need to make my mortgage payments and help my family. If you can give away $3,000 if it falls into your laps, you have my admiration. I live in a 900 sq ft home that is by no means lavish. But I guess according to the post and comments my reputation is now besmirched since twice in 7 years I was paid an agents bonus by builders, though my customers who are fully informed AFTER they made their own independent choices (since I do not want them to think I want them to go this way or that), seem to hold me in high esteem. And in the end they are the people I most want on my side. More often than not they chose the home with no bonus, which was fine by me.

Guess I am just a rotten person. Though it seems to make a blanket statement about bonuses is not quite the way to go.

There's an agent in SA that continually talks sellers into putting a bonus on listings & then I see them expire eventually, overpriced. Why don't you just have them lower the price? Confuses me completely. The way our MLS works adding a "bonus" does nothing to the status of a property, a price reduction will at least be sent out to folks who are looking in that area as a "price change" where they might take a second look at it. It just makes more sense.

My brain is bouncing around a bit on this one. Here are three thoughts/anecdotes:

1. IN 25 years, I've only gotten one bonus-- a dinner at Chez Panisse from a new homes development. I would have sold the unit anyway, and they didn't have to offer it.

2. When you do offer me a bonus, it does catch my eye. Who doesn't want to picture themselves slathered with lotion in the Bahamas? And there's a slight possibility that by catching my eye you will stand apart in the crowd and make yourself more memorable when I decide which homes to show my client. However, that does NOT mean I will steer my client to buy your listing because there's some kind of goodie in it for me.

3. I heard about a new home development who reduced their 2BR/1BA floor plans and started offering substantial bonuses on each one sold. So an agent who had a bunch of buyers in contract on 2BR/2BA homes began pulling them out of their current contracts and switching them over to 2BR/1BA homes. Sleazy? Maybe, but I don't know the whole story. Perhaps he really believed the 2BR/1BA homes had become the better deals. . .

Bonuses have never inspired me to show one house over another. I usually laugh over them with my clients. "Oh look, if you buy this house, I will get a bonus!" We all laugh and then laugh again when we look at the deficiencies of the house. It's demeaning to think I am so unprofessional that I would shoehorn a buyer into a house they don't want, just to get that stupid bonus.

Mindset from another era. The one with big cars, aprons, June Cleaver and pipes after dinner...come on.

Forget the bonus, price it right and let's get it sold for what it is worth.

FYI...if someone offers a bonus, and an agent accepts it, I don't think that makes them a bad person.

It is when someone pushes one property over another because of the bonus - that would be questionable to me.

Paul - In my 9 years I have never had a bonus come in question. I have had them show up in the MLS but a home that I have sold has never had it. So, although I agree with your point not in my repertoire.

I would pass it on.

One way to look at a BONUS is that you know your buyer has X more in their negotiations on their new home.... Right ?

AUG

2010

Hi Paul -- I wish BA bonuses would go away. I had one transaction as a buyer's agent where the commission was so low, it felt like pro bono work. I didn't bring it up with my client as I felt they would view me in a negative vein, although we had a great relationship. Your concept is totally sound and stating it up front makes perfect sense. I just don't know if that would potentially jeopardize a potential/almost there relationship. I'm sure it's probably all in my head for the most part, but I tend to see the opposite crop up more often these days. It's pretty rare in our local market to see a bonus.

John, I think you miss my point. Rather than pointing a finger at agents who accept a bonus, I question the premise of offering one. While a buyer may be perfectly happy to let his/her agent earn a little something extra, I personally, do not like finding myself in a position where my integrity could be called into question, whether merited or not. The client may not begrudge the extra couple of thousand, or whatever arbitrary amount is to be bandied about, but is that not extra potential savings to them? If accepting a bonus means I left a little on the table that could have benefited the client, or if it puts me in a position to have to justify the additional compensation, I just don't want it. If you are comfortable with your choice(s) to accept a bonus in certain instances, so be it. Everyone and every scenario is different. I don't hold myself up as some altruistic martyr that will sacrifice my just compensation in the name of charity. I simply want to earn my standard fee. Anything above and beyond that carries too much appearance of impropriety, even when none exists, for my taste.

Sidenote: If you are selling 40k mobile homes, I would certainly hope a higher percentage/fee were the norm. I wouldn't consider making a livable wage for assisting those in lower price ranges a "bonus."

Chris, it is a policy that I have difficulty following at times. This is such a people pleasing business that more times than I care to admit I've simply absorbed the brutally low split and never mentioned a word of a shortfall to the buyers. It hasn't posed any problems with my relationships with clients in those instances when I have stuck to script, though, and has given me the confidence to invoke it as policy with much greater frequency. Our clients want us to be justly compensated for our services, and do not begrudge us the ability to feed our families.

Every few months this comes up but usually not in the light of day. People generally end up insulting one another and not speaking for a few days (we're a touchy group, and two of my best buddies sit on our mls and board ethics, etc. committees).

So where do you draw the line between a bonus and slightly higher broker coop? Without smearing license law all over the platter here, can we talk about what is the usual or standard compensation? Yes, I know it's illegal to discuss this between brokers, but I'm going to wiggle through the loop hole. If you look at our MLS, about 80% of the broker cc is 2.5%. Therefore, a reasonable person would conclude that 2.5% is the standard compensation (but I didn't say that), and anything over that is, what, "extra"? How is this .5% different from a bonus?

We almost always offer 3% cc on relocation listings and many reo sellers also offer 3%. Many listing agents suggest to sellers that they consider offering 3% because so many of "the other Realtors" are prone to respond to the stimulus of money. I can swear on my kid's heads that I almost never know what the cc is on an individual listing when I'm showing. BUT, personally, more and more I work on an explicit agency agreement at 3%, since the deals are becoming more and more time consuming and difficult to manage.

So the question is (buried in here somewhere), is there an ethics-based difference in your mind between the extra .5% and an agent bonus since most cc is offered at 2.5%? Feel free to delete this if it's so egregiously illegal you'd be doing me a favor.

I take all agent bonuses and give them to my buyers either by way of closing cost contribution or rebate after closing or broker credit at closing..

Hello Paul. This is a little off topic but I had a buyer BROKER, not buyer agent, tell me that his investor wanted to offer me a personal $1000 bonus, if I could get his cash offer ratified on my REO listing in Montgomery County last year. I told him that I don't think that it is allowed, and that I wouldn't take it anyway. He ended up having the highest offer, so we ratified, but he dropped off when the sellers title company was clueless and incompetent. This buyer was a Licensed MD Attorney as well!

Paul I wrote an article about this very subject titled agent bonuses and unethical Realtors. Take a look I think you will enjoy it.

They mean nothing to me and I would never push a client towards a house with a bonus or not a bonus. they buy what they are in love with, end of story.

Now sometimes Fannie or Freddie offers bonuses with home path and I don't mind taking that but the standard still applies.

Following up on Leslie's comment (#33), I just listed my father-in-law's property. We're offering 3.5% to the selling agent. I'm in my second year of real estate and from a small office. My strategy is to draw attention to the listing, not to undermine someone's ethics. The notion that I could be doing that never occurred to me, actually. I'll be following this discussion with interest.

I'll take the bonus and the discount!

You are not doing anything illegal or immoral here. . bonuses are just a silent cry from the listing agent that they run out of ideas how to market the property and this is their last ditch effort. . .

I repeat. .I'll take the bonus and the discount from my client..

I'm not going to allow an agents inept marketing efforts to keep me from my goals. .

This is business. . my wife want to go to Hawaii this year.. .and I want to buy a 2010 Camaro. . .

Give me a bonus please. .

Thanks,

A bonus for a fast close, or on time close is always a welcome gift. It helps to make up for the deals that only offer a very small compensation. In Ca, conditional compensation isn't legal, meaning you cannot offer a bonus with full price offer. Thanks for the post.

Getting a lot of comments on giving up the bonus. So here is a question. What do you do with short sales or homes where the co-op offered is less than called for in your agency agreement? Do you also pass on that deficiency to your clients and make them pay the difference at the closing table?

My goal in every transaction is to find the right house for my client regardless of any bonus or shortfall in the co-op offered. I figure that they offset in the end. If the commission offered is short then I take it there (in the shorts). If the co-op is higher it can offset the shorts.

I would not through my client under a bus for a bonus. However, what constitutes a bonus? There are no set fees. I have shown homes paying only 2% and sold them to my clients. It feels good to sometimes sell one with 3.5 or 4% commission.

There are several legitimate reasons to pay extra. It does make the house stand out to the agent when there is a lot of competition on the market. It may be just as good a buy as the house next door paying 2.5%. It also signals to me as an agent that the seller is motivated and is not playing games.

The other time high commissions or bonus are appropriate are on low priced properties that are hard to move or have problems. That is simply compensating the selling agent for a lot of work.

Now would I encourage my buyer to make a full price offer on an over priced home so I could get extra money - NO!

Paul, you make a valid point. Price it correctly and have it in great showing condition and the rest works. I find more and more Buyers want to select the tour lineup for the day on their own, too.

My opinion is that I let my buyers know what is available on the market that meets their needs and expectations. If they choose to buy one that has a bonus on it I'll take the bonus. I have never selected a property to show because it had a bonus and by the same token I've never discarded one because it had a bonus. If a seller wants to pay a bonus so be it. I'm not going to turn down an offer of a bonus if it is the home that my buyer wants.

Paul,

Excellent post and point of view! Gimmicks are a weak attempt to get attention and anyone with a bit of common sense can QUICKLY read between the lines.

I will occasionally offer a small bonus on certain listings, with the intent to make sure as many agents as possible will LOOK AT THE LISTING at least, and hopefully show it to their clients.

How many times have you looked at a property on the MLS, and taken a pass because of one reason or another, only to find out it did have many features or aspects that the buyer would have liked and should have seen that were not obvious from the listing?

I would never 'steer' a client towards a home with a higher commission, or in the same vien a higher purchase price just so my commission will be higher, and I expect my co-broker to do the same. But it is not as black and white an issue as some posters above have made it out to be.

Buyers agents work hard, and especially in this period of high inventories and lots to choose from, are showing a lot of homes with fickle buyers. Why not compensate them for their work?

As a listing agent, my duty is to my seller, and if I need to put some of my commission on the line to show them I am doing everything possible to get their house sold, there is a time and a place for that (not with every client or property mind you!).

I do admit that sometimes the bonus can come across as a red flag waving with the words "there is something seriously wrong with this property, and this is my last resort to get it sold at this price!". So I am very judicious in my use of this tactic.

Some might suggest that offering a bonus makes a statement by the listing agent about how they feel about the integrity of some selling agents. The feeling that some agents might be strongly influenced as to which homes to show and how enthusiastically they promote one home over another.

Paul,

I worked in development sales for 12 years and often the developer paid out a broker bonus. It is a reality that some agents did in fact force the home on their client, when we had a bonus. And they were typically the ones who would never consider giving it back to the buyer to get the price down. In some cases I even suggested it to close the deal, and they were ready to chop my head off!

However, most good agents that we dealt with, never even paid attention to the bonus, and were only looking in the best interest of their client. If you are in the business for helping people, this should not get in the way, but should be looked at as a reward for working hard and getting the deal closed.

Basically, there are two sides to the story, good agents do the right thing and bad agents do the wrong thing...bonus or not.

Glad to wake up to some dissent in the comment thread this morning. While I can't respond to every comment without sounding like a broken record (I think my views on buyer agent bonuses are fairly clear by now), a couple of points caught my interest. Notably: there are no set commissions in real estate, so what constitutes a bonus? A valid point, but it's pretty easy to identify a bonus by a rate in excess of what the free market has identified as the median range or the gigantic wording in the remarks (BONUS! BONUS! BONUS!). Regardless of whether the client is pushed in the direction of the higher co-op or not, it allows for the potential appearance of impropriety and constitutes an extra percentage or so that I could have negotiated off the price/costs for my client. If we agents never looked at the compensation being offered prior to viewing a property, that doesn't necessarily make us ethically correct. While we wear such ignorance of the co-broke as a badge of honor many times ("I have no idea what I'm making on this deal. A satisfied client is all that is important to me."), we can also miss potential savings for our clients by doing so. Again, to those who feel entitled to the offering to make up for those other deals that don't pay well, that's your prerogative and quite legal. Just rubs me wrong to pocket monies in excess of my standard rate that could have secured a slightly better deal for the client. Kind of like an unsolicited gift card or the like from a vendor post closing for the referral of a client. It is an appreciated gesture, but I typically pass it along to the client. RESPA legalities aside, the last thing I want is to sabotage my reputation in any manner whatsoever by the appearance of guiding my charges to one service or another for the spiff.

Leslie makes an interesting point, but the last line is prescient. A carefully crafted loophole to allow for discussion of the subject manner in terms of actual rates, but I'm too skittish to bite. ;)

Buyer agent incentives do not motivate ethical agents to show certain listing over others. Ethical buyers agents show homes based on their buyers search criteria. I believe that an incentive to the buyers agent is a waste of the sellers money. If the sellers truly want to motivate the buyers and not waste money, the incentive would be offered to the buyer.

I give any bonus money back to my clients as well, and make sure they know about it before I even show them the property. I also appreciate what Leslie has to say... great discussion.

Well said Bruce #41!

A lot of foreclosure properties will offer a bonus out here. I love it. I use it to help my client. Bank owned properties won't offer repairs so I will offer to fix something or provide a home warranty. I would never push a property because of a bonus but if they choose a home that has one I would never turn it down.

In California though we don't ever sit down at a closing table. We have escrows, it's much different. Rarely does a client know how much I make. I would never be ashamed of it though because I'm good, I'm worth it, I always put client's first and protect them to the fullest.

Bruce (#41) - No, I have not to date asked a buyer to make me whole on a short sale. If a bonus or even standard commission fee were ever warranted, it would be on those occasions where you put in 6 months of work for the aggravations of a short sale, but I have not enforced any BA compensation provisions in distressed situations. The buyer likely needs those funds to make needed repairs that the seller cannot perform, plus the entire endeavor is simply too taxing on all involved. Not an extra stumbling block to an already difficult deal that I feel like erecting.

Paul,

I hear you and totally agree. I've had agents call and ask how to intice me to get my clients to buy their listing.

My response is in your blog: "If it's the right house for my clients, we are all set, otherwise, there is nothing you can do for me that will help."

I'm building a reputation and referral business. Since I've taken care of my clients, they have taken care of me in the last few years and I've been busy despite the economic slowdown!

All the best, Michelle

I show homes to clients that meet their criteria, period....it has nothing to do with whether it has a bonus on it or not. I would never push a particular home on a client...they choose the home...I don't. If they choose one that has a bonus on it...I'm not going to turn it down. This is a business and I don't see anything unethical or wrong with that. I've always had a great rapport with my clients and know they would have no problem with that. I work very hard and don't worry about my ethics being in question. In a "regular" job, bonus' are given out all the time and I bet those are rarely given back. Its a business, do a great job and your compensated and sometime you may get that bonus check.

The whole bonus incentive has ZERO impact on whether I show that listing or not because in the end I need to know the buyer feels warm and fuzzy about the house THEY selected so I can sleep at night!

This is only my 2 cents and should be taken as such.

Leave the RUBBER HOSES in the garage.

If a listing offers a bonus to the BA, great. Will I show the listing because of a bonus? No. If the house fits the criteria and the buyer wants to see it, they will see it. If they buy the house at terms that were agreeable to them and I am paid a bonus, great. Check goes in the bank and I move on to the next deal. Have I compromised my integrity or my fiduciary responsibility to my client? Absolutely not.

How many bonuses have I received in 6 years? One, trust me it was small. They are very common here in the Atlanta market and builders are starting to offer them again. Cool.

The general public already thinks that agents make too much money. Why? Because we do a bad job of educating our clients on all of the behind the scenes activities that we engage in and how much time we actually spend working on their behalf WHEN THEY CAN'T SEE US. Now, when we are offered a slightly higher rate of compensation, we are supposed to feel guilty about accepting it. Now, we actually ACT LIKE WE THINK WE MAKE TOO MUCH MONEY. Ridiculous.

When was the last time you heard of an employee doing a great job on a project, producing a great result being offered a bonus and saying, OH NO, I AM ALREADY GETTING BEING PAID MORE THAN I DESERVE.

Get a grip! Employees receive performance bonuses, stock bonuses, holiday bonuses, etc. It's a financial decision made by the employer.

When a bonus is offered on a listing, it's coming from one of two places...the seller has made a financial decision to do so, or the listing agent is cutting their side and has made a financial decision to do so. And if you have ever submitted an offer on one of those listings, then you know that the first place the seller and/or the listing agent looks to is the bonus. They like to play a now you see it now you don't game with the "offered" compensation. But, that's another post.

Now, each agent and each brokerage is responsible for running their own gig and making their own decisions. You don't want to accept a bonus, or you want to give it to your buyer, or you want to deposit into your bank account...Your choice.

Bonuses don't make people act unethically...people act unethically because they are UNETHICAL.

If a listing is offering a $10,000 bonus and the house doesn't suit my buyer, then what do I care about the bonus?

If it suits your buyer and you didn't hold a gun to their head to MAKE THEM BUY IT, then I hope you enjoy your vacation in the Bahamas or your new car...or the warm & fuzzy feeling you gave yourself by handing it over to the buyer.

Jenna - It's a bit different when the entity giving the bonus is the one you are charged with negotiating against. Of course, one could devolve into a discussion of the entire commission structure in that regard, so that can of worms is staying securely shut on this thread. Let's just say this, when GM gives you a bonus for making cars, bully for you. When an independent contractor is compensated over and above the going rate for selling a particular property, appearances of impropriety are hardly a figment of an overactive imagination. We are all professionals here, and I doubt any one of us would be moved to promote a given property based on said bonus, but it smacks of a bygone era of backroom deals.

One point that those who dismiss my reluctance to accept a bonus keep failing to address is the better deal you could have secured for the buyer en lieu of such a bonus. Sure, maybe the buyer picked the property all by him(her)self with no prompting from the agent. If you are being offered over and above your standard wage, none of you feel it behooves you to forgo the bonus for a reduced purchase price or closing cost concession? Impropriety, or the appearance thereof, is only part of the equation. Negotiating to your fullest capacity on the client's behalf is the other. If there is additional margin in the offering to the agent than is customary, I leverage that for the buyer not because it makes me feel warm and fuzzy, but because it is my obligation.

The laissez faire attitudes towards some deals paying and other deals not is fascinating. One shouldn't negotiate more off the price for one client because the bonus makes up for the one you got short-changed on last month? What kind of nonsense is that?

Who ultimately pays that bonus to which many feel entitled? The buyer. That $10k extra you pocketed in bonus compensation is 10k more than the buyer had to pay for the house.

I loved Jenna's answer #59. No point in further comment from me - she read my mind.

Paul,

I have always felt a little strange about this topic. I work with several buyers every year, so I often show homes that have the agent bonus above and beyond the usual 3% co-broke.

These type of listings put me in an unfortable position with my clients. I feel that if I like the home, I should just bite my tongue for fear of looking like I am putting my compensation in front of a home that might or might not be for them.

I have found the best way to handle these type of listings is to just bring it up before you show the home. I use the situation as an opportunity to really have open conversations with my clients. If you can have a conversation about your own compensation and a bonus on a listing, other topics are not as tough to discuss.

Bottom line, you need to show the "bonus" home anyway, try to turn it into a postive for you and your client.

Bob Dickinson RE/MAX Excalibur Scottsdale AZ

Bonuses to the BA are few and far between. That being said, I'd never council a buyer to purchase a home based on my compensation, just like I'd never Not show a house because they were offering less than what I feel are standard commissions. Thinkning about it, I don't believe I've even been involved with a bonus on the buyers end. HUD gave 5% and a $500 "bonus" on a house I sold last year, but at a $30,000 listing price, total compensation was still "shake-your-head" low. By the way, I use use SPF 30. I don't want to deal with skin cancer in my Golden Years.

SPF 30? In Michigan? Kind of like wearing a parka in Scottsdale ;)

I don't offer bonuses and I can tell you having one offered to me will not make me PUSH a house to a buyer. If the house fits his needs I show it, period. If he likes it, I take the cobroke offered in the MLS. I don't try harder to sell a house with a bonus.

Paul: My thoughts exactly. Give the buyer a bonus or sweeten the pot a little to get the home sold. I never offer bonuses to a selling agent. Why? The buyer is the one we want so give them a little bonus.

Paul,

I wonder about your statement that if your part of the commission is below your standard you want your client to agree to make it up to you before you show a property. Nowadays, it is the client that decides what they want to see.They research the internet and decide.

What is their reaction when you tell them that 2 % commission on a $ 500,000 house is not enough for you.( I picked some numbers ). If I was the client I would most likely say:Don't bother I will go there my self and work with the listing agent.

I used the bonus once for a house that needed to be sold by a certain date. It was on the market for a few weeks, but no serious activity. My mistake was that I only offered 2.5 % commission .This might have been below the "standard"

I offered a 1 % bonus with the same list price, and sold in 2 days, just in time for my sellers time table to move out of state.

It just shows it can work.What ever you preach ,most sales agents are motivated by money.

Everard - Nice bike.

Interesting points from all angles. Wish I had a point of view from a personal case but I do not. We have never received a bonus..just all varieties of commission percentage.

I show properties that match what my client's are looking for w/out any regard to the commission split or any potential Bonus. If my buyers happen to fall in love with the property offering the bonus then great, it's just what it is, a BONUS.

I've sold many Freddie Mac homes while they offered the $1,500 buyer agent bonus. In fact I wrote two offers this week on Freddie Mac homes offering the bonus. Did I steer the buyer on purpose? No....THEY make the call on what properties to write on, NOT ME. If I can get my buyer a good deal and make a little more for myself, great.

Times are tough, deals are falling apart left and right, transactions are much more difficult and are taking alot longer to close at prices so cheap that we are having to work twice or three times as hard for HALF the money we used to make.

Bottom line is this is our business and what pays our bills and supports our families. I don't think a BONUS should put an agent's reputation on the line or take away their good night's sleep. In fact I sleep much better at night knowing that I will be able to pay this month's bills.

I agree with Denise #70. I don't purposely pick a house with a bonus, but if a client likes a house with a bonus it is nice. I think one of the reason to offer a bonus on an older listing is to maybe bring it more to the forfront of a realtor's attention. Sometimes they work, but not as much lately>

Which is why I determine my fee scale, Denise. I don't leave it to the whims of fate or the other agent. If they happen to want to pay me more than my stated rate, it goes to my client in one shape or form. Lots of justification about tough times and feeding our families, but that's irrelevant to the discussion. If something is right (even if subjective in nature), it is right. If something feels wrong, it is wrong. No matter what the conditions of the market or other mitigating circumstances that would color judgment. Believe me, I could use a bonus check as much as the next guy. I have experienced far more hardship in the past couple of years in this highly challenging market than I would ever care to admit. The fact that accepting a bonus does not feel right to me is in no way mitigated by those struggles. I don't think less of another agent for accepting what is offered, it just doesn't jive with my own internal compass.

I don't care if the listing agent offers a bonus or not, provided compensation is fair. If I get one then so be it I am not going to give it back. Does it help your client get me to push your home-not at all. Frankly I don't often look, if it is on the MLS and my buyers are interested we go see.

Okay, Everard, I'll add a little more than my admiration of your sled. While your straw scenario is as good a place to arbitrarily start as any, it is a frivolous exercise since I have yet to disclose what my fee structure is. Foolhardy to assume that it would be a straight-line rate independent of price point consideration, or even one specific percentage/fee (rather than a range) for that matter. As I will not get into the specifics of my compensation model with fellow agents (anti-trust and all that), I'll simply say that it would take a more egregiously low split than the one mentioned in your scenario to have any bearing on the buyers at that price point.

And with that, I leave the thread in the capable hands of my fellow agents. I will take your responses off the air. :)

So you're going to stand aside and chuckle while I throw myself under the bus?

You have offered up a conversation about bonuses, but it seems that a bonus could be defined as any pay out over the "going rate" of compensation.

What's the "going rate" for compensation? The average of the cc offered? The median? The mode? Or the average, median or mode of what is actually paid out?

I am interested (not critical, interested) in your goal of securing the best deal for the buyer by declaring that you will work for a standard rate and no more. You base this on: (1) the buyer could get a better deal if you forgo a bonus or excess coop comp (2) you wish to avoid the "appearance of impropriety".

My responses:

(1) the buyer could possibly get a better deal if he chose a broker who rebated part of the commission. But then he wouldn't have the benefit of your services, which presumably have value. You have determined that your value is the "standard rate" -- a concept which I still have trouble agreeing to unless you are more specific in determining that "standard" or "going" rate.

(2) The "appearance of impropriety" is certainly an issue if you haven't openly declared your fee structure at the beginning of a buyer relationship. Just like a listing agreement, a buyer agreement establishes the compensation. In fact, I think we display actual impropriety if we do not work with a buyer agency agreement from the very beginning. The upfront eliminates any squeamishness at the closing table. In fact, twice this year I have had buyers sit for extra hours in a closing when the comp came in low on the HUD from the seller side: once from a builder and once from a bank on a short sale. Your buyer will sit there and wait it out -- in fact advocate for you -- if they have made that agreement for comp from the beginning.

One way to think about this might be that you establish the minimum and the maximum compensation (percent based) you will accept. If you truly worked for a standard rate, you would set that rate and expect to receive it regardless of what is offered for compensation in the mls. If a bonus exceeds that range, than you apply that amount to the closing costs. If you're going to rebate a bonus or excess coop comp, then you should also expect a buyer to pay you for any difference between what is offered or paid out, for example in a short sale or at an auction. It would irrational if you said you worked on a system not to do this, and unfair to all other buyers if sometimes you accepted less.

Leslie - I'm trying to disengage from this thread for goodness sakes. ;) I actually agree with your points and base my rate schedule at a point that has proven to be viable for my level of production while remaining competitive with the field. All compensation is discussed up front when the buyer hires me, as opposed to leveraging the stale gambit that the "seller pays all Realtor fees." If there is one portion of the compensation conundrum that I could do better at, it would, in fact, be enforcing my own policy by turning to the buyer in cases of egregious shortfall. I don't disagree that it could be tantamount to preferential treatment to do so for some clients and not for all. Not sure if it is an imperfect science or imperfect scientists, but I am no more beyond reproach than anyone else in trying to execute a protocol that is equally equitable to all.

Hi Paul or is it GHANDI:)

You seem a tad defensive and very Image conscience. You may ask yourself why you are so concerned of what others think of you and what is your purpose for telling us how ethical you are?

Seems many jumped on the bandwagon of pushing Realtor Sainthood. I am starting to believe that being a Successful Realtor means having a very high opinion of ones self:) So I now have hope for the future:)

Read Lenn Harley a simple statement you and many others have stated BUT with no pretensions.

Agents that offer bonuses are not putting you in any Ethical predicament it is of your own making.

Self Deception/Absorption, Affectation, False Pride AND Self Righteousness may be bigger Character problems than a Listing Agent offering a bonus to help get a home sold and an Agent showing the home thinking maybe buyers will like it and they can make a few extra bucks for the Family.

After reading this don't forget the word Denial:)

I can only write this from experience and I am aware of that: just keep doing the the next right thing as you have been and stop worrying about things that don't exist, whats in others minds and that which you do not control.

You asked for detraction, my guess is so you would have a choice: This was my part.

A couple of quotes to consider:

"Affectation is the ridiculous effort of the ignorant to appear wise, the attempt of the barren soul to appear rich."

"The argumentative defense of any proposition is inversely proportional to the truth contained."

And for the Saints: Read the parable of 'The Pharisee and the Sinner" It may be hard to find, from the actions of the 'Religious' in these times the leaders may be keeping it a secret.:)

Agreed,

Sounds like the listing is over priced or a major fixer. I could understand if the listing is priced competitively and the playing field is level combined with the urgent need to get it sold faster than other listings of like kind values. HOWEVER , the Listing agent should focus its incentives to benefit the buyers credit back for modest repairs (Carpet Paint and Tile), help with closing costs, moving expenses, new Furniture and appliance credits.

I have seen a couple of REO listings offering the Buyers agent incentive, (offered by the Banks asset manager, in which none are keyed into the local marklet from their desks 2000 miles away) usually they needed alot of work, too much work for a home buyer in that price range to swallow a $30k to $50k repair job...none the less we did not show that property since the values were not inline with competitors.

I have seen several large developers offer an extra 1% incentive to help clear their standing built inventory before the end of a quarter for their quota goals. They first offered extra incentives to the buyers as well, Landscaping, appliances, closing costs, upgrades in flooring and cabinets. I have asked if I could credit back my 1% incentive towards the buyer closing costs and upgrades with no problems other than the lenders concerns.

Phil, thanks for injecting a little crazy into the thread. Just wouldn't be Active Rain without a quasi religious response to a rather temporal matter of professional compensation. I appreciate the free online diagnosis, but me and my life-sized Fathead are perfectly content to wallow in our own shared neuroses.

Well, I think everything that can be said on this subject has been said...LOL...my very first deal offered a bonus, only I, as the agent representing the buyer, did not realize it. Why not? Because I was soooo new, I thought "$2,500 bonus to SELLING agent" meant the listing agent (told ya I was a newbie), so I didn't think a thing about it although I wondered why it disclosed in agent remarks. I mean, who cares the seller is paying the listing agent a bonus? LOL

When it came up at settlement, I said, "What? What are you talking about?" and when the settlement attorney explained it, I immediately replied "oh, wow, I didn't know...hey, credit it to my clients' closing costs, can you?" They were thrilled; I was just surprised *I* was the selling agent.

Pual,

You are right. It does bring our ethics into play here. I always tell my clients that since I am not going to be moving in with them I won't push one home over another. They usually laugh and agree that maybe my lifestyle is not like theirs so it is their call. I provide the CMA and the Sellers property disclosure they may affect their offer but I never choose one home over another. I couldn't imagine sitting at closing and have the Buyer see I received a bonus to get them to buy one home over another.

Great article from you.

My 2 cents is take the bonus if you feel its justified or leave it if you feel otherwise. Short and sweet. I don't believe any agent would steer a client towards a listing just because it offers a bonus. That's not serving the client's best interests.

"If you are offering compensation that does not meet my minimum standards, I will show the property if my client agrees to make me whole." What if your client does not agree?

You cringe when the compensation is too low and expect the client to make up the difference. You also cringe when the compensation is too high and offer it back to your client in one way or another. Well, that is being consistent.

Compensation that is too low is often seen as a disincentive to show the seller's house while higher compensation, perhaps including bonus compensation, is seen as an attempt to add additional incentive to show the house. When I represent a buyer it is my job to show houses that meet the buyer's criteria, not my criteria for compensation. I know that you agree with that approach. I have closed sales wherein the compensation was less than I would have liked. I hope to make it up when that satisfied client refers business to me. I don't believe that I have ever closed a deal where there was a bonus. I guess it would depend on the circumstances, the client and the amount. I certainly would not want my client to think that I pushed a house on him because of the incentive to me.

Today, more than ever, trust is a vital element in your relationship with either a buyer or a seller.

It's fun to read these comments and see that the agents on Active Rain are working hard to earn and keep that trust - and to follow their own internal rules of ethics.

Now... if only the other 80% had the same attitude.

Paul you wrote;

"Just wouldn't be Active Rain without a quasi religious response to a rather temporal matter of professional compensation."

No No No Paul but nice try to dismiss me and my main points which were on the 'temporal matter of professional compensation.'

My quasi religious parts[logic and reason] as you mis-perceived for your own comfort was based on yours and others Ethical Attack on this type of compensation based on an illusional prediciment you created in your own mind.

How is what I wrote any crazier than what you wrote? Go ahead re-read your post and comments. You tried to tell me that the agents who offer more than what you see as standard compensation and agents who show these homes may be unethical and the kicker was that you insinuated that this type of bonus compensation created an integrity problem between you and your clients.[I leave the rest alone]

I stand by my main point based on your opinion of bonus compensation and its effects no religious connotations intended;

Agents that offer bonuses are not putting you in any Ethical predicament it is of your own making.

You don't believe they do it on purpose just to get you?:)

Your ethical argument could be more construed as 'Quasi Religious' than what I wrote.

Come on Paul... Hey I did give you plenty to pick at to dismiss me and my argument again:)

By the way that last paragraph in my first post was me being a Wise A..'not quasi religious:}

How did Steve Miller put it "Take the money and Run"

If the buyers and sellers get what they want does it matter what you get paid?

Is it unethical to give money back to your clients because of a ureasoned fear and away from your Family?

John, to your point, are you obligated to show a property which offers you $100 as a co-broke? What about $10? How about a FSBO with no compensation? I'm sure we have all taken a low split in the shorts on numerous occasions in the name of client retention and community service, but at what point does one take ownership of his business rather than relying on whatever scraps the party across the table deigns to lob at him? My acceptable range of co-broke fees is loose enough that it seldom comes into play, but being wholly reliant on the listing agent's generosity to earn my living places far too much power over my career in his hands. I don't have to accept his .5% offering just as I don't have to accept a 5% bonus for doing my job. The listing agent is not my employer.

Like Lenn, I pass bonusus to buyers, usually requiring seller to pay closing cost in lieu of bonus. That gets it onto the HUD-1 as seller to buyer.

Phil - As the second to last line of your latest comment is the bit that most pertains to the discussion (not overly interested in the psychoanalysis of any personal failings I may be projecting through this posting), I'll address it.

"If the buyers and sellers get what they want does it matter what you get paid?"

In my opinion, yes. If I am paid a bonus that is above and beyond my normal compensation, that is money that could have been shaved off the buyer's bottom line, whether they know it or not.

If stating as much on a Real Estate forum projects an air of misplaced authority or moral superiority, that is collateral damage with which I can live. If I am conjuring imagined dragons to slay for the sole purpose of ingratiating myself with the general public, are you not doing the same through vociferous objection to same? If you believe this post and commentary is simple ethical puffery, are we to focus on the possible personal projections that lead you to this conclusion?

Are we not here to market our services and provide the general public with some insight into our beliefs as they pertain to selling Real Estate? Is this not a platform upon which to engage fellow practitioners to discuss and debate the merits of certain business practices? Let's leave the commentary regarding personal motivation where it belongs, on our psychiatrist's couch. We both stink at it.

For the record, I see Dr. Cuervo weekly.

Seriously, gang. That's it. No mas. I am sick to death of buyer bonus discussion, and need to go find one that I can spurn. ;)

Hi Paul~ We can't control how others run their business, but we can control how we run ours. If I showed a home to a buyer and there was a bonus to me, ( which has never happened yet) I am not really sure what I would do! But as far as offering one, I would much rather have my seller just decrease the price.

Paul - You're getting lots of comments on this one. I always start out by meeting buyers in my office and before we look at any properties I review my "Buyer Agent" contract with them. It spells out very clearly what my compensation will be and that they will be responsible for it. A bonus from a listing agent or home warranty company, kick back from home heating oil company, or what ever, is not mine to keep, only the amount specified in the contract. This keeps it simple and gives me a lot more fun negotiating for my clients. So listing agents, bring on that bonus.

I see bonuses and greatly increased co-broke commissions all the time, but cannot remember the last time I sold a home with any type of bonus or increased commission. Sometimes they do stand out from the crowd because of the bonus, but I can't make my clients like a certain home just because I get a bonus, so I don't believe it undermines my ethics in any way, shape, or form if I end up getting a bonus. That would just be...a bonus. LOL! Great for you on always giving it back to the buyer, though. I will consider that at my next bonus opportunity.

I never dreamed of giving my client the bonus money. Period. I've done a great job servicing them throughout our relationship. (I'm sure) So, I can't imagine splitting my income with them for providing great service. This is coming from a quite ethical Agent.

I'm really still, after reading a lot of these comments, I'm still not understand why this is being discussed.

If you are doing something unethical to draw your client to the home. Then, shame on you. But, if you are not, then lucky dog ya just made an extra buck ya don't have to split with the Broker. YAY!

BTW, in MO & KS we are required to disclose "bonuses".

Hi Paul...After having read all 92 comments before mine I can understand why you are tired of the discussion.

I'm fighting the bonus fight right now. We, Jim and I, have a beautiful waterfront point lot with over 500' of shoreline. However, the developer of this subdivision is trying to sell his lots and is offering a substantial $20,000 to the selling agent. It is difficult to compete with that...it is not just one waterfront lot it is quite a few of them. There is also another new subdivision with incentives for the selling agent, $10,000 bonus, and buyer gets $10,000 in closing costs.

What's a girl (and her hubby) going to do? Right now I have it off the market but it sure ain't gonna sell thataway.

Kate

Great point Mary. The premise of this discussion is as if we all make the same $$$ on each sale and that somehow that to make more is a moral and ethical violation with our buyer client. If you don't accept bonuses, do you disclose all the commission splits that over an amount you deem "fair" or do you show them all the houses without discussing the commission split? If someone buys a house with a higher commission split than one they looked at that had a lower one, do you give them the difference? I think this discussion is splitting hairs. I work on commission (which is a moving target) not for a specific dollar amount. I also negotiate with my buyer clients a minimum commission that I will get paid at closing by the seller or them. Which means I am free to show them properties that are paying $0 or $1,000,000 in commission from the listing broker/seller. Note the key word was "minimum" Any extra paid is my gain. I also disclose bonuses should they come up.

What's this notion that if a bonus is offered that the buyer is getting a raw deal. If you go down that road, then you must also argue that if a commission is being paid from the sales proceeds then too the buyer is getting a raw deal because that is money that could have been "given" to the buyer. Just because the seller has agreed to pay for certain expense doesn't mean that the buyer is losing out. Everything is negotiable. How many of your buyers actually pay your commission? In my 15 year history of selling, none have paid. I think that's a pretty good deal for the buyer. When buyer's start actually paying commissions then we can have another discussion about where the bonus should be applied. Also, if the buyer wanted to pay a bonus to me, should the seller feel cheated? NO! We enter into negotiations and agreements on our own free will, so do our clients and customers.

When you start down the path of what is "fair" you open a very dangerous can of worms (or serpents). What is fair? I think fair is whatever I negotiate. I think too often agents forget they are salespeople, not concierge, confidant, or counselor. At the end of the day, not withstanding the terms of our brokerage agreements, as a salesperson our job is to sell houses. It is not our duty, obligation or moral requirement to share the burden or benefit of our clients, no matter how far emotional pendulum swings. That is theirs and theirs alone, unless your name is on the sales contract as a purchaser or seller with them. That doesn't mean you can't empathize with them and help them through, but you needn't make it yours.

Don't get me wrong, I do the best I'm able to do for my clients and I don't "push" one house over the other, for any reason. That is their decision to make, they have to live there and they have to make the mortgage payments. And no, I don't want your vacation timeshare slot, that's not a value to me, but I will accept payment in all legal forms of currency with proper disclosure.

Is it bad to "give" your commission away to your clients? No. But please do with your money what you want and withhold your moral judgment about what others do with theirs.

Your comments are valued and welcome,

Vic

I agree with you. I think that the buyer's agent bonus could better be used as an incentive for the buyer. I have never been prompted to show a home due to some bonus to my compensation. My obligation is getting the best price and terms for my buyer, so I would want to make sure at the end of the day, that is exactly what I did. Thank you for posting about this, it is a great discussion thread.

AUG

2010

Vic - Why would I withhold anything on my blog, moral judgments or otherwise? Oddly presumptuous demand.

Kate - Always good to see you in my thread. I wish you and Jim luck with that prime piece of Real Estate. Knowing that no agent would ever be persuaded to chase the higher co-brokes of your competitors, I'm sure justice will eventually prevail in your endeavor. That second competitor sounds tough with the concession to buyer closing costs, however, so I will instruct Lisa in New Orleans to put the gris-gris on their operation. ;)

Karen - As I have fallen into the bad habit of responding only to the various degrees of scathing rebukes, allow me to correct that misstep by thanking you for your comment.

I mean it this time, no more Pacino moments for me ("Every time I think I'm out, they pull me back in!") on this thread. The objectors gave me a few new avenues of thought to explore, but I remain steadfast in my opinion. Tomorrow we can discuss the merits of clubbing baby seals for chewing gum.

Good night, all. Even you indignant types.

Wow, whole wide range of opinions on this one. So here goes... I see nothing wrong with getting and keeping a bonus. I also see nothing wrong with using part of your commission to buy a fridge or something to keep a deal from coming apart. There is nothing wrong with being paid for your work. This is America! Enjoy it. It's a really personal decision though. I know personally that I could case less about a listing with a bonus because the chances are my buyer probably won't even like the house anyway.

I have to disagree. Just like I accept what I consider "discount" commissions on distressed homes and others, I accept what I consider an above average commission or bonus on some as well. And no, I don't hang my head in shame. My buyers know exactly what is going on as well. I let them choose the homes we view, they also choose the home we buy. The commission is the last thing we look at.

Okay Paul fair enough but you statement to Vic is curious, I will leave it alone.

A good listing Agents job is to attract buyers and produce an offer and Agents control most buyers.

To offer a 1/2% more commission to buyer agent is a 'taught' competitive strategy in Marketing; does it work I don't know for sure but incentives are used in many situations in all kinds of employment.

It is the listing Agent willing to give up some of his/her commission sometimes and it is added to overall commission sometimes. It is business strategy not intended to cause a moral dilemma between buyer agent and client. If any Agent questions their own motives when showing a home with a bonus that is their problem and not induced by Buyer, Bonus or Listing Agent.

Good buyer Agents try to help find the home their clients will want first and foremost. Some buyers are willing to overpay to get what they want that does not mean Agent didn't do right or Agent should feel bad and give up commission because 'Agent' feels they didn't get the best deal, the buyers got what they want![it is not always about just getting the best deal and sellers have every right to market their home in the way they choose]

In fact many over aggressive Agents that are all about getting their clients 'The Best Deal' cause them to lose their Dream Home. Anybody written a Blog on that?

In a bonus situation if you negotiate a deal were that the buyers and sellers feel comfortable with it is a win-win deal the bonus is what it is. It is not a given that buyer would have gotten bonus back in closing cost/price but it is a given the listing agent or seller would get the money if refused by buyer agent.

So by separating bonus/commission bump from negotiations, when you get it you can give back to client, give to charity keep it for yourself etc. "Thanks but no thanks" does not seem to be in best interest of client.

Yes you can include it in negotiations but how do you know you couldn't have gotten same price without giving it up? If Agent is concerned about the ethics, tell buyers about commission bump and ask their opinion if they want you to use it as leverage in negotiations or a rebate if that would ease Agents mind. You might find clients think the opposite and see no dilemma and tell you to keep bonus.

Remember if you don't take a commission bump bonus you also are taking money from broker.

How far do we need take this? What about dual representation? If a buyer did their homework and found home they wanted called you to show it and immediately put in an offer do you cut your commission since it was so easy and you might feel guilty about it?

Bottom line a bonus/commission bump is a Marketing Strategy[incentive] employed by listing Agents and their Sellers. A strategy that has been around for a long, long time in Sales and employment of all kinds.

A Professional REALTOR with ethics and standards will work in finding buyer the home they 'want' and look out for their best interest in the total process and a home with a bonus or commission bump will not cause them a moral dilemma about their motives and show no shame about what they get paid or will they ever give away commission based on emotion and/or Guilt.

PS; DITTO SCOTT

I'll take time to read the arguments later, but I am in agreement with you that my employment contract with a buyer will say what I will earn and if the seller doesn't offer it, the buyer will make me whole. I work for the buyer and this way, the buyer knows that they are paying me. Once the industry sees it this way, the seller will no longer be paying a buyer's agent a commission. And that will be just fine.

Mixed feelings, Paul.

I'm not for sale. I have never received a bonus (as a matter of fact I gave one back to a builder once to make a deal work), but I wouldn't be against being paid one. I am worth every penny. They just don't influence me.

Great post and interesting comments.

Many exclusive buyer agent offices refer to the "bonus" as a "buyer agent bribe" and they are discussed in the report from NAEBA on "Under-Reported Home Buying Issues" from 2007.

For anyone interested that report is available as a free download through NAEBA or from our office website at this link:

http://buyersagentannarbor.com/200711091638Challenges.pdf

The more interesting question here could be: How many offices offer their designated buyer agents a larger split if they sell an in-house listing?

Isn't it really the same idea?

I see nothing wrong with a bonus or increased commission (3.5% more more) as long as the reason for bringing the client ISN'T the commission. I would never steer my clients to an overpriced listing simply to get a bonus, that's unethical.

For the record, I've never received a bonus.

Paul - I have received a good number of bonuses over the years, most often from builders, especially when I have sold multiple homes for them within the same calendar year. It doesn't influence me to push one property over another, but I'll take the money when it's offered. No qualms in my mind about that, as long as the net result is still a good one for my clients. That being said, if it was a gigantic bonus such as the one you mentioned, I would feel compelled to share that or to make sure my clients understood upfront that I was being compensated in that manner. Lots of crazy responses above. :)

Paul - I forgot to ask this question of anyone who might want to respond:

For those of you who won't go out of your way to show a home with a bonus, do you avoid showing homes that offer far less than you are used to receiving? I am sincerely curious.

Highly entertaining thread, Jason, no doubt. Particularly amused at being informed that my comments are valued and welcome. On my own blog. Sure, put your feet up, eat my cereal, walk around in my robe for a bit ...

As to your question (I'm only coming back to respond to those I know at this point), I am a convert to the BA agreement. I shied away from using one for quite awhile out of concern for how it would be received by the prospective client, but it has been a great practice since I adopted it. Knowing what my rate range is, the buyer knows that they will have to bridge the gap on properties that offer lesser compensation. As mentioned above, that range is flexible enough that I have seldom found myself in the position to turn to the buyer to make me whole.

Wow Paul! right on future broker. ;-) I didn't read the entire thread of comments, but will come back another time. I like your idea on the BA.....I've been on the fence...but in this market, I completely agree with you. ;-)

So far, I have been dubbed self-righteous, pious, sanctimonious and more for this silly little post (mostly on other threads). Never thought a frank opinion about the ethical considerations involved in a Real Estate transaction would strike fellow professionals as preachy, but perhaps I am too close to the material to allow for fair reflection. Seems an incredibly cynical reaction to me. Disagreement, dissent, discord ... basically any other "d" word you can conjure is to be expected, but disparaging the mere audacity to state an opinion as it equates to best business practices? When did so many of us give up?

All of us who know you, Paul, are laughing away the accusations of any self-righteousness or sanctimonious behavior on your part. It just isn't in you. You don't shy away from having an opinion and always provide a well thought out basis for that opinion. This post was a basis for some good discussion and thoughts. It made me think about a few things. That is what a post like this is supposed to do. Well done, P.

Hi, E :)

Paul, I did not mean to offend. I thought you wanted commentary pro or con. I didn't realize that was your your ottoman I was resting my feet on, your bowl of cereal I was eating, or your robe I was wearing for disagreeing with you. And I stand corrected, it is your blog and you are right, it is not my place to tell you not to express an opinion, for that please accept my apologies. Regarding "anyone's" comments being valued and welcomed, I was simply ending my post with a courteous salutation, not granting permission.

As I stated before I don't find what you do is wrong, I just don't agree with the reason why you do it. My comment about your moral judgment was based on my inference of your comments that bonuses received were received so as a matter of twisting his fiduciary obligation by putting his financial interests before those of the client, When that could be and probably is the furthest thing from the truth for any agent.

Nonetheless, I think your post was great to create the discussion. Debate is always healthy.

Thank you for the clarification, Victor, and I do respect your dissenting opinion. I have to confess that my replies became a bit more terse as the thread escalated, and that is my failing, not the reader/commenter's. For the abrupt dismissal, I apologize. I stand by my opinions as I know you stand by yours, and the world keeps spinning via Real Estate yin and yang. You are always welcome to express your opinions here, and I will try to be a more accommodating host on the next occasion. I think I'll tackle something less controversial next time out. Maybe religion or politics ;)

LOL, now that would really stir the 'puddin'. It was a long string and thank you. I look forward to more comments, debate or simple agreement. Have a great week.

Would this be a bad time to solicit fans for my facebook page? lol

Bonuses have fallen by the wayside in this area and in fact, I can't remember the last time I saw one offered. I'm thinking for the very reasons you state here. If the seller is willing to provide incentive to a buyer's agent, the incentive should be used to help the buyer's bottom line. That's what they hired us to do. Find a home at the best possible terms. This was really a great piece, and wonderful food for thought. Paul, anyone who knows you and reads you regularly, knows where you are coming from. You are as sanctimonious as Donald Trump is humble. Not very.

Read point and counter point......

Funny so many could find fault with doing your job. Never apologized for a dime I have earned. Avoid bonuses like the plague. I just want to get my clients in the home they want. Bonuses clutter the landscape...they are always requested to be removed and offered in the form of either a reduction in the sales price or buyers credit at closing. The decision is usually based on what the lender will allow.

I don't think anyone should use how they are being compensated as a criteria for selecting homes to show. That goes both ways. High coop and low coop...Just find the right home and move on.

AUG

2010

Paul. My sellers don't offer bonuses. We just reduce the price accordingly. They also don't offer to pay closing costs or offer higher than normal (for the area) co-brokes. Our goal is to get the house priced as low as the seller can handle. Price sells houses not bonuses.

On the buying side I just let the buyer know how much the bonus is and ask then what they want me to do with it. My compensation has already been sorted out with the buyer so the bonus really makes no difference. usually they just suggest I keep it. So I do. of course in the real world this rarely happens. My experience is that as soon as my buyer submits a less than full price offer the bonus disappears from the deal.

It's okay, Susan. You don't have to cover for me. We both know that piety and Paul go together like peanut butter and jelly. ;)

John - Agreed. My biggest problem with the entire concept of the bonus is the source offering it and that it is not an actual bonus in the true sense of the word. This is not compensation for additional work, job well done, but an advertised enticement. I would feel differently about it if the client wanted to reward the agent at the end of a hard-fought house hunt rather than it being dangled as a carrot by the other party.

BB - I concur on all counts. Some mistake my reluctance to accept the bonus as somehow holier than thou, but it is a simple matter of defining my own compensation scale to mitigate as much conflict of interest (and screw jobs) as possible.

I am still trying to find logic in a sentiment voiced by many on this and that other thread that extra compensation from today's deal is somehow an antidote to lower compensation one recieved on an unrelated deal months or years ago. Interesting.

A small note to Phil, if I may: what is your purpose of greeting a potential customer on your AR profile with 'posessing a strong sense of justice', in all caps, mind you?

From the perspective of one who does not sell real estate for a living, I've always found it odd that an agent accepting a $20.00 gift card to Outback from a stager or any vendor was a 'kickback', but an offer of a brand new car or an extra few grand as bonus by the one buyer's agent is supposedly negotiating against is money well earned.

Inna, you have touched upon a few thoughts that I had yet to voice on this thread. Particularly in regards to the perceived ethical high ground I claiming in this post while its detractors have populated their profiles with marketing propaganda designed to accomplish the very same feat. I suppose it is of little consequence as we are all here to market our wares and put our best feet forward, but the irony is not lost on me.

As to your questions regarding the topic itself, I have a hard time sorting out the incongruities you invoke as well.

Paul was you last post a confession that your claims to ethical concern for your clients when there is a bonus involved is just Marketing propagaqnda[bull]on your part?:)

And since that is your truth you assume that all personal marketing claiming ethics and standards is propaganda? Now that is Irony:)

Remember you insinuated Agents involved in offering incentives in Marketing of Homes may be either un-ethical or greedy depending on which side they were playing and unnecessarily causing a conflict of interest for the Ethical Agents like you. Are you going to completely deny this as you make 'My Style' remarks towards those who disagree with your logic and reason and play the role of a victim and dismiss the educated arguments and opinions of your detractors and pretend there only personal attracts?

When you were a child did your mother hear this from you a lot; "Mommy their picking on me"

Have I missed? the times you challenge a detractor of your point of view with a valid, professional unemotional, insightful counter other than you have the right to state your own opinion and to write what you want on your blog. I havn't missed your dismissing them personally for challenging your point and it's validity along with challenging your insinuations and motives.

You put it up for debate BY NOT KEEPING IT TO YOURSELF or among like minded friends and assosciates and posting it in public.

You should be happy you got more Yeah's than Nay's and some that love you coming to your rescue by their own free will. Yes everything is personal on some level even in debate. So What? I don't like the statements 'Nothing Personal' and 'It's just Business'

By the way I do believe that your giving any offered bonus to your clients is admirable, ethical and shines a good light on our profession. The debate was in the reasoning, insinuations and pretensions you felt compelled to add along with your disagreement with incentives in our industry and was that a accurate assumption in itself.

Again if you see this as a personal attack so be it. But Hell I don't even know you; just what you wrote here and thats what I had a concern with not you but I do have a tendincy to be blunt and a smart a.. I have given up most my vices but I still can't resist being a Pompus A.. when I get an opportunity; for that in this and my other post I apologize BUT still stand by non personal attack points:)

PS; OOP'S I did miss your replys to John and BB

I hear you and agree but adverting enticement[Marketing call it what it is you do it also]] is not only what makes the Real Estate World go round but America or any Capitalist Country and incentives also is prominent in all industry's as motivation.

Do you boycott products that seem always on sale which means they really are not, or company's who's commercials are enticing and not relevant or Burger King when they offer a product special on a Burger only if you by fries and a drink because they make huge profits on fries and drinks

I think you may be confusing your personal morals for ethics two very different things

You claimed yourself Marketing Ethics is propaganda. So is an agent just 'enticing' clients to believe he is ethical by giving bonus to them to use in hope of getting a referral or repeat business and giving up the bonus is as tax deductible marketing expense

Educated indeed. Ironic.

No, I am not curled up in the fetal position, Phil. I do not feel attacked. I am confused as to where you misread hurt feelings or persecution in any of my comments. I find some of the labels and arguments ironic and damning of the collective interest in ethical discourse (in that derision of a practice that one finds ethically dubious is somehow too presumptuous to address as a topic), but you'll have to do better to make me feel personally victimized in any way, shape or form. This is nothing but a blog. Opinions get shared, ideas debated and objections voiced. How any of that translates into a child's plaintive cry for help escapes me. This is really getting tedious. You are welcome to add any further commentary you like, but I'd suggest that this dead horse of a topic has already received a merciless beating.

Just read your PS, Phil. Now we are returning to topic. My point of contention is the source of the enticement, not the enticement itself. Puts the interests of the client and the agent somewhat in contention. Yes, the Real Estate world is moved by money, as it should be. While I would prefer each party was fully responsible for the pay of the agent in their employ, the industry is not there yet. For the time being, we can eliminate as much of the conflict of interest as possible by eschewing the sweeteners that are meant to draw us to a particular goal, rather than the best interests of the client.

Again, I'm largely rehashing, though. I think this one has run its course from just about all perspectives.

Just to beat a dead horse here are my mis readings; maybe it was more 'Mom can we go now these jerks are annoying me and for the life of me I don't know why' Yes it does seem I was A TAD more out of place than you, NEVER MIND:)

I don't hold myself up as some altruistic martyr that will sacrifice my just compensation in the name of charity.

I appreciate the free online diagnosis, but me and my life-sized Fathead are perfectly content to wallow in our own shared neuroses.

As I have fallen into the bad habit of responding only to the various degrees of scathing rebukes,

Wow, we are now reduced to revisiting the bridge of the comment chorus. Thanks for repasting my comments and again veering off topic to address my debating prowess (or lack thereof). As I said, time to move on, Phil. You have an entire blog to populate, not sure why you are wasting all of your energies here.

For the record, anyone who launches an initial comment by derisively referring to the author as "Ghandi" is essentially asking for whatever he gets by way of a retort.

Am I really the one with hurt feelings here or are we treading in that murky realm of internal projection again?

<<Attention Real Estate shoppers: You have reached a post that is no longer in service. Should you need assistance or feel you have reached this post in error, please press "esc." As always we value your commentary and look forward to serving your threaded hijinx again in the future.>>

Now go sell a house or something.

LAST ONE PAUL I PROMISE:)

My last post was a lame attempt at an apology by myself re-reading them I can see you didn't feel attacked maybe just surprised and baffled

I agree with our previous post

"For the time being, we can eliminate as much of the conflict of interest as possible by eschewing the sweeteners that are meant to draw us to a particular goal, rather than the best interests of the client."

I would like to see that applied to ALL PROFESSIONS who claim to be concerned with clients/customers best interest.

You say your contention is with the source not the inticement. I am not sure of your 'source'

But I will guess that you can see it as were a listing agent might use the bonus to lure a greedy Agent into selling[not help buy] their clients that home for the extra cash? Not a good thing.

Yes their are bad apples in every Profession but I am optomistic and believe they are only a few

But your point if it wasn't there[bonus] that could never happen[or confict of interest] is valid

I beleive the bonus is used 95% of the time as a Marketing Strategy letting Agents know the sellers are motivated and not to lure Agents based on internal greed but I am not real confident writing that.

I spent most my life trying to stay away from the Rat Race and all the Bull involved and lack of honesty and sincerity but in Real Estate it is all around me and you have to be on your toes to preserve your personal character and not fall in to the mud.

Most training tells Realtors about being of high ethics and their fiduciary duties out of one side of their mouth and then teach Marketing tactics[like bonuses] and recommend actions that are dubious at best out of the other side.

One example I was told to tell prospects for a listing that some devious agents use open houses to find buyers for other homes but not me I am a good Agent and the first open house I held my broker told me to take other area listings because the purpose of an open house is to find new buyer clients.

I still don't believe the 'source' or enticement can't induce the Majority of Professional Realtors to even challenge in their own minds a conflict of interest or need to apologize for accepting it if it works out that way. I don't agree that the bonus should always go to buyers needs based on theory all sellers would have given it up anyway in price. There are considerably more import things to focus on during negotiations to put together a win-win deal. If you mishandle negotiation it could cost your clients much more than the bonus your going to credit them

As a realtor I had to accept how we get paid and the many consequences that come along with that and also try to understand when I work in a transaction for a 500k home after 1 viewing by client I may make 15k[less split] and when the transaction after 30 viewings is a 100k home I make 3k

What do I say to owner as LISTING AGENT when I sell a 500k home in 5 days to 'my buyer' and the hud gives me 25k [because my broker allows me to knock off only 1%]

You know their are many 'situations' I could mention bonus is one of them if you make that an ethical and moral question you can't hide from the others.

Acceptance of injustice or coruption is a bitter fight for me but in this case I don't see a big problem accepting a bonus if all else is on the up and up; and maybe about .1% of listings offer them.

Let them have their Marketing Strategy with bonus offers they are easy to handle and it is way down on my list of things I have seen and heard about that are real conflicts of interest and harmful in big ways to clients.

A fair and well-reasoned conclusion to a tempestuous discussion. As such, I will not offer any additional counter arguments to the question of the bonus, but rather let it stand as the last word on the matter. Good on you, Phil.

Except that this should have been a "Members Only" post since we were discussing compensation.

Tom

Explain your logic, Tom. Why woud discussion of compensation be appropriate behind the veil of a member's only post, but not fit for public consumption? If there were to be anti-trust concerns (no violations in this thread that I can discern), hiding the post from the public would not mitigate such in the least. Moreover, brokers discussing compensation in secrecy is much more ripe for an accusation of wrongdoing. If you have to shut the doors to address a matter that does not involve client confidentiality, you probably shouldn't be talking about it. I have no such qualms discussing what I consider a matter of ethical concern in the public forum. If there is any concern over what the DOJ would make of a thread, its public or private nature would have zero impact on whether a violation had occured. My hunch is it might even be considered more damning to have a bunch of agents/brokers discussing compensation behind closed doors as that gives the appearance of impropriety (I thought I was done with that phrase on this thread ;).

Privacy does not give agents additional priviledges to discuss matters that are legally out of bounds.

AUG

2010

Paul,

Please don't twist my comment to suit your agenda. I never said we should take illegal or unethincal debates into a members only post. I simply don't believe having discussions about certain issues in public is appropriate.

Like you, I'm entitled to my opinion which I expressed. I'd invite you to discuss this in a different venue, but given your position, I think I'm going to agree to disagree with you and leave it at that.

Take Care...

Tom

My agenda, Tom? Take your leave if you must, but it's a simple question. What makes a private discussion amongst agents regarding compensation any more appropriate than a public airing? Perhaps I misinterpreted the nature of your objections, but I still don't understand the rationale.

What the hell did this become? While I admire banter and debate and am damn sure Slaybaugh can deal with any directed in his vacinity, there seems to be a vitual edge-tour that is plain pissed that he brought up the subject in the first place.

And Member's Only? Hell, I'd be more willing to do Biz with someone who actually brought it up so I could see it, breathe it, and make my own decision as a consumer. To make it an Agent's Only Post and Idea would drive me off faster than Bono into that particular tree.

The discussion of compensation being an "illustrious priviledge" is archaic in my opinion. But if you make it consistent, I'm in!

Show me your pay scale and I'll show you mine. Transparency, Full Disclosure, and making sure A$$Holes don't mine my Bank Account like Gold Diggers ripe on a precedent introduced by a Male or Female Component that rhymes with Anna Nicole's former attorney is ... in my own best Legal & Ecomonmical Interest.

Sardi from the top ropes. Thanks for the tag in, getting weary.

I understand that some think I am posturing, and that's fine. Maybe trying to earn myself a little bit of business by proclaiming myself the ethics brigade and all that. First time I've been tabbed as hall monitor, but I guess there is a first for everything. I don't like a particular practice. I discussed it openly (originally intended for consumers, ironically), as I do most everything else. Some disagree with the thesis, and that's cool. Some think I'm trying to empty their pockets, so I can understand the vitriol from that corner as well. This latest bit about what is acceptable fodder for publicly viewed content is an entire different blog post. What a carnival.

Anyway, I actually enjoyed the debate(s). Gets the blood flowing and the mind racing. Hopefully we were all able to take away something that we hadn't considered before and apply it to our practices.

Paul,

I did not read all the comments, so I might be repeating someone before me. This is the position of an agent. And all the explanation is about the dangers to the agent's relationship with the buyer.

Understandable. I can even understand that you think it should be repackaged, etc.

What if the amount of money offered as bonus is significantly less than the amount of reduction in price to do the same thing, sell the home faster?

Credit towards buyer closing costs in that instance, John. Why offer to line my pocket further if A) we all claim it doesn't matter to us, and B) the buyer is the one making the ultimate decision. Further incentivizing the one making the actual purchasing decision is always the way to go in this agent's estimation.

Parked.

This relic of the past was a good tool when everyone represented the seller! But, a bonus to a contracted Buyer's Agent is a bribe!!!!!!!!!!!!!!!!! It's unethical imoral and most likely illeagal!!

If you have any doughs about it's ethicy just look at North Las Vegas! Where bribes were paid to both agents, LO's and buyers.

Bill

AUG

2010

Paul,

Just UNCLICK the box that says you want to be notified when someone comments.

POOF! It's magic! LOL

This blog does not allow anonymous comments

Paul Slaybaugh, Scottsdale AZ Real Estate

Scottsdale, AZ

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